Falling Ethereum prices, which dipped to around $370 last week after peaking at nearly $1,300 in January, are sucking the life out of GPU demand, Moore said. At current prices, the economics of mining are simply not appealing and there is no financial incentive driving GPU demand, he said.

Why It's Important

The prices of preferred crypto-mining cards are already starting to fall, suggesting previous market shortages are being alleviated, Moore said. The price of the Advanced Micro Devices, Inc. (NASDAQ: AMD) Radeon 580 is down from $530 to $399 on Amazon, while the price of the NVIDIA Corporation (NASDAQ: NVDA) GeForce 1060/6 GB is down from $500 to $399, according to Morgan Stanley.

“We would not expect cards to get to the launch pricing levels given higher-priced GDDR5 DRAM, but we are clearly seeing the effect of easing shortages," Moore said.

For investors, Moore said the impact of falling cryptocurrency demand will have the biggest impact on AMD’s business. Last week, AMD said its 2017 revenue exposure to the cryptocurrency market was in the mid-single-digits, and Morgan Stanley estimates that exposure climbed to 10 percent in the fourth quarter.

Moore said Nvidia likely has significantly less exposure to the cryptocurrency mining market given the lower hash rates of their devices.

What's Next

Morgan Stanley has an Underweight rating and $8 price target for AMD and an Equal-Weight rating and $258 price target for Nvidia.

AMD was trading down about 2.5 percent Monday at $9.80, while Nvidia was down 3.6 percent at $223.13.